Commercial banks are becoming digitalized, while fintechs, with great advantages in technology, have joined the consumer lending market.

Nguyen Thanh Lam, 28, from Phu Nhuan district in HCMC, plans to buy a scooter worth VND30 million. With monthly income of VND8 million from mobile phone repair, Lam can save VND1-2 million a month and pay debts.

However, Lam cannot access bank loans to buy the scooter because he could not satisfy requirements of banks. He is considering borrowing money from finance companies. However, the lending interest rates of over 20 percent per annum were too high.

Lam and others like him could become a client of fintechs, which, by effectively exploiting big data, have step by step broken the barrier in consumer credit.

Vietnam is one of the countries with the highest consumption/GDP ratio in Asia.

A report from the Economist Intelligence Unit (EIU) in 2015 showed that the total consumption of Vietnamese individuals and households was $127.7 billion, and the consumption/GDP ratio was 67 percent.

The figure was higher than that of developed countries such as the UK (65 percent), Germany (54 percent) and Japan (59 percent). EIU predicted that the consumption growth rate in Vietnam in coming years would be equivalent to GDP growth.

According to the National Finance Supervisory Council, outstanding consumer loans by the end of November 2017 had increased by 59 percent, compared with the end of 2016, which was much higher than the total credit growth rate of 15.3 percent.

The consumer credit growth in 2017 continued from two groups of suppliers – commercial banks and finance companies. While the former focuses on lending with mortgaged assets, lending via credit cards and overdrafting, the latter lends to fund cars, motorbikes and household appliances.

Finance companies have been stepping up lending in cash and most of the loans do not require collateral. Some finance companies even do not require borrowers to prove their incomes and debt payment capability.

According to LBP Research, Vietnam has 65 million people aged 15-65 whom commercial banks cannot access. The figure worldwide is 2 billion people, according to the World Bank.

Finance companies provide 12 percent of total consumer loans, while official consumer credit only serves 30 percent of customers who have demand.

Small loans and high risks create a barrier which prevents borrowers and lenders from meeting. However, fintechs, or mobile payments, could break the barrier.

Fintechs are expected to be the biggest rival of commercial banks and finance companies in the near future.